Video Editors: Varun Sharma and Ashutosh Bhardwaj
GDP numbers for the July-September quarter of fiscal year 2019-20 have now proved beyond all doubt that there is a crisis on the economic front.
The growth rate of 4.5 percent in the second quarter suggests that the GDP for the full year 2019-20 will not be able to hit the 6 percent benchmark and, even if the economy speeds up in the last two quarters, it will get stalled at somewhere around 5.5 percent.
To make matters worse, core sector growth contracted by 5.8 percent in the month of October.
It would be foolhardy to say that the worst is over and the recovery cycle is in the offing as Gross Fixed Capital Formation, which is an indicator of new investments, is down at 1 percent from 12 percent a year ago.
The only engine in the economy that is firing at the moment is that of government spending but even that might run into trouble, now that the government has exceeded its fiscal deficit target for the entire year in just seven months.
Moreover, all the reforms undertaken by the government to fix the economy have failed to deliver thus far. The implementation of the Insolvency and Bankruptcy Code has been able to shore up only 40 percent of the stressed assets.
Secondly, slashing of corporate tax has failed to lift India Inc’s mood enough to spur fresh investments.
Moreover, the fund created to provide a boost to the real estate sector is yet to kick in and will take time to bail out the crisis-stricken construction businesses.
The government needs to understand that unless the mess in economy is taken care of, it won’t take long for common folk to see through its social and political machinations.
To quote journalist TN Ninan from his column on the GDP numbers, the government “should stop whistling in the dark”.
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